Navigating Coventry’s Financial Markets: Forex Trading And Mining Tips

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Navigating Coventry’s Financial Markets: Forex Trading And Mining Tips – In the field of finance, cryptocurrency is a new market that has attracted a lot of attention, especially among investors. So, wouldn’t it be nice to know which day of the week is best to invest?

In the study conducted by prof. Dr. Shamsul Nahar Abdullah from INTI International University’s Faculty of Business and Communication (FBC), along with his colleagues from Kinnaird College for Women, Pakistan, Sohar University, Oman, and University of Lahore, Pakistan, found that the prevalence of cryptocurrency purchases on Monday showed promising lucrative trading and profit.

Navigating Coventry’s Financial Markets: Forex Trading And Mining Tips

Navigating Coventry's Financial Markets: Forex Trading And Mining Tips

The study, titled “Calendar Anomalies and Market Volatility in Selected Cryptocurrencies,” which primarily focused on Bitcoin, explains that December showed significantly higher returns for all currencies compared to January.

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“When Bitcoin was first introduced in 2009, it started creating a frenzy among investors, especially now that the price of these assets is equal to gold. While the demand is still high, investors are now forced to learn the calendar effects in cryptocurrencies to make extra profits as the momentum has steadily increased over the years,” said Prof. Shamsul.

According to the study, the price mechanism and volatility of cryptocurrency are of interest to financial market researchers. Cryptocurrency has been found to have a very volatile market due to frequent price movements, both up and down.

“The current data and findings are quite logical. High volatility comes with significant unpredictability for investors, making them wary of trading the market. “It has also been found in past research that Germany and Japan tend to have the highest volatility on Mondays, while the UK experiences high volatility on Thursdays and the US and Canada tend to have high volatility on Fridays,” he said.

Published in the Journal of Cogent Business and Management, the research provides evidence of the vulnerability of digital currencies and draws attention to financial markets. The January effect was also discovered, which is described as a tendency for stock prices to rise at the beginning of the year, especially in January, also of great interest to the financial market.

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The study of Prof. Dr. Shamsula Nahar Abdullah from INTI International University’s Faculty of Business and Communication (FBC) entitled “Calendar Anomalies and Market Volatility in Selected Cryptocurrencies” revealed that Monday is the best day to invest in Bitcoin.

“Among the top five currencies, Bitcoin has the highest closing price. The highest growth that occurred during 2017-2018 showed the highest trend but gradually decreased in 2019. However, it again showed a fluctuating but upward trend after that,” he said, adding that the higher price was due to manipulation of other well-known cryptocurrencies. as a big cryptocurrency crush.

Current data also showed that minimum returns for Bitcoin are usually seen on Saturday, while maximum returns are usually seen on Monday and Thursday with the least risk compared to other business days.

Navigating Coventry's Financial Markets: Forex Trading And Mining Tips

“The cryptocurrency market is considered new and more volatile than traditional financial markets, which could be the cause of higher volatility and inconsistent results.” It is highly speculative and influenced by things like news, hype and rumours, which makes it a challenge to spot recurring trends or anomalies,” said Prof. Shamsul who is optimistic about this year’s return of high profits for Bitcoin.

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In particular, the importance of cryptocurrencies rose sharply after the financial crisis of 2007–2008. As well as puzzling the authorities on how to regulate it, this market has offered academics an intriguing area of ​​study.

Professor Shamsul added: “Due to the lack of regulation, it has attracted significant investment, but it has also often been criticized for serving as a platform for speculation and money laundering issues.”

To conclude, he said the study is crucial for policy makers and regulators as it will help them create regulations taking into account the anomalies of the calendar.

“In addition, they are learning how to reduce the risk of abnormal earnings and price increases for digital currencies, which could dampen investor enthusiasm for cryptocurrencies.” Investors will also benefit greatly from the study as it will help them discover patterns of returns and hazards across the market as well as create portfolios for maximum profits,” he said. With a turnover of more than $3.8 trillion per day, foreign exchange (Forex) swaps are the most traded instruments in the global foreign exchange market, according to the 2022 Bank for International Settlements (BIS) Triennial Central Bank Survey.

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Foreign exchange swaps allow dealers to exchange currencies, with an agreement to reverse the transaction at a specified date and price in the future. It’s a fast-growing market, increasing by around 20 percent in the last three years alone.

Such contracts support international trade by helping to manage funding liquidity and as a hedge against exchange rate risk. If there is excess volatility in this market, it could lead to a drop in dollar liquidity and limit cross-border lending, which in turn could lead to a drop in investment and economic activity.

For many years, the market operated with a pricing system that was both predictable and widely understood. But in recent years, the way foreign exchange swaps are priced has undergone a significant change.

Navigating Coventry's Financial Markets: Forex Trading And Mining Tips

A major change in pricing methods came with the global financial crisis that began in 2007. Before that, setting the forward rate on an FX swap contract was a fairly mechanical exercise, which was set by the covered interest rate parity (CIP) principle.

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Using this equation, dealers set the forward price based on the current exchange rate and prevailing interest rates for the two currencies being traded. Essentially, CIP should take place in a frictionless world where there are no limits to arbitrage, which is when traders take advantage of price differences in different markets.

Thus, in the swaps market, traders can make a financial profit if the forward rate differs from the rate implied by the CIP, making a risk-free profit by borrowing in one currency and borrowing in another currency, thus hedging the exchange rate by using the forward rate. contract.

However, since the global financial crisis, this “iron law” of international finance has largely collapsed. Prices have become much more diverse and persistently deviate from CIP. The premium for exchanging euros, Swiss francs and Japanese yen into US dollars is particularly noticeable.

These deviations may indicate excess demand for dollars in the swaps market, or may be due to a more limited supply of dollars due to tighter banking regulations and other funding constraints. For example, since 2008 there has been a wider range of funding costs and tighter regulatory restrictions on bank balance sheets.

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In a world where deviations from CIP are prevalent, dealers have to turn to alternative methods of advance pricing. Can dealers learn about factors that can put pressure on demand or supply for dollars in the swaps market?

To answer this question, Olav Sirstad, an economist at Norges Bank (Norway’s central bank), and I started with the hypothesis that dealers now use order flow – which provides a measure of net demand for a currency – as a basic signal to help them set the futures price. .

This is based on the idea that dealers can use this data to set the forward contract rate at a level that would offset any order imbalances and help them minimize the risk of building up too much inventory.

Navigating Coventry's Financial Markets: Forex Trading And Mining Tips

To better understand the situation, we looked for indications from the market that dealers were using transaction flow information to set the forward rate.

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We tested the hypothesis by looking at one-week inter-dealer market currency exchanges, using data from the Thomson Reuters D2000-2 platform both before and after 2008. Most importantly, we found a significant effect on prices when there were surprising changes in order flow in the post-crisis period, but without such influence in the years preceding the crisis.

Prior to 2008, there were only very limited deviations from CIP during times of higher demand for US dollars – we found variations of less than half a basis point for each standard deviation in order flow. But in the years since the global financial crisis, the same increase in order flow has caused CIP spreads to widen by up to five basis points.

We found two main reasons why this can happen. According to our estimates, up to four-fifths of the increased price impact since 2008 occurs either when the heterogeneity of US dollar funding is large – in other words, when there is a large diversity in funding costs for dealers – or when the currency swap contract exceeds the regulatory reporting date on at the end of the financial quarter.

This makes sense, given that larger funding gaps reduce the potential for arbitrage, while transactions that exceed quarter-end reporting thresholds also coincide with periods when less capital is available for arbitrage. As a result, it becomes more difficult to balance prices during these times and dealers must make larger adjustments to ensure there is enough supply to balance their inventory.

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Overall, demand and supply fundamentals are important for pricing

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